Top 10 Stocks to Buy: Xpeng Enters the Top 20. Is It Too Late to Buy?

Chinese EV manufacturer Xpeng (XPEV) entered the top 20 of Barchart’s Top 100 Stocks to Buy on Monday, moving six spots to 16th place. Up 150% in the past year, with 108% of it in 2025, there’s no question XPEV stock is on fire. 

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Meanwhile, one of its biggest competitors in China, Tesla (TSLA), is headed in the other direction, down 41% so far in 2025. 

Although Xpeng’s momentum is bound to end eventually, its weighted alpha of 208.72, significantly higher than the stock’s performance over the past 12 months, suggests it has more near-term appreciation for shareholders.

Given the tariffs and trade wars, market volatility is bound to remain high, so Xpeng isn’t a good investment for risk-averse investors. However, it could be a good investment if you’re aggressive and risk-tolerant. 

Here’s why it might not be too late to buy.

XPEV Down After Earnings

Xpeng reported its Q4 2024 results Tuesday before the markets opened. As I write this in the pre-market, its shares are down about 3%. 

The good news: It reported better-than-expected fourth-quarter results and confident guidance for Q1 2025. 

In the fourth quarter, it had top-line revenue of $2.2 billion, with a 10-cent loss per share on the bottom line. While the top line was right on the Wall Street estimate, its loss was 12 cents better than the consensus. 

Further, in Q1 2025, it expects to deliver 92,000 cars at the midpoint of its guidance, 320% higher than a year ago, with 31,000 deliveries in March, 250% higher than March 2024. 

The company expects revenue in the first quarter to be around $2.1 billion, $100 million higher than the analyst estimate. However, it did not provide earnings guidance. 

Barron’s noted that the company finished 2024 with nearly $6 billion in cash. Analysts believe that Xpeng will generate a free cash flow of $500 million in 2025, a sign that its path to profitability is becoming more apparent. 

Naturally, with significant gains in the first 2.5 months of 2025, investors had high expectations for the stock. The selloff post-earnings could be the old “buy on rumor, sell on the news.”

Three Things to Hang Your Hat On

The first thing, other than the fact it delivered respectable earnings this morning, is that analysts generally like it. Of the 38 covering it, according to MarketWatch, 29 rate it a Buy (76%), well above the S&P 500 average of 54% Buy ratings. 

A second nugget to consider is Xpeng’s vehicle gross margins. A year ago, they were 4.1%. In Q3 2024, they were 8.6% and 10.0%  in the fourth quarter, more than double a year ago. It’s now delivered six consecutive quarters of vehicle gross margins. That will help get it closer to profitability.  

Over the past three fiscal years, its operating cash flow has gone from -1.09 billion Chinese yuan (-$152.6 million) in 2021 to 956.2 million Chinese yuan ($133.8 million) in 2023. Given the reduction in its operating loss in 2024, that number should be even higher in 2025. Hence, the analyst estimate of $500 million in free cash flow this year.

Lastly, as Vice Chairman and Co-President Dr. Hongdi Brian Gu stated in its press release, its launch of “attractive new products” in 2025 will help improve its profitability and free cash flow. 

For example, it just launched updated versions of its G6 and G9 EV SUVs, with better, more streamlined options packages combined with lower prices. While the Trump administration may be moving backwards regarding the electrification of transport, the rest of the world is not. 

Xpeng will have plenty of markets outside the U.S. to continue selling its products. Investors needn’t worry about America’s temporary pause on electrification. 

Valuation Is Always a Concern

Based on the analyst estimate for 2025 revenue of 75.02 billion Chinese yuan ($10.5 billion), according to S&P Global Market Intelligence, Xpeng’s market cap of $24.3 billion is just 2.2x this estimate. In 2026, that multiple will fall to 1.7x sales based on revenue of 100.39 billion Chinese yuan ($14.05 billion). 

Of course, estimates are just that, but assuming it hits these numbers and profitability and free cash flow come along, today’s price-to-sales multiples aren’t excessive. Ferrari’s (RACE) current P/S ratio is a whopping 11.6, six times Xpeng’s. If you want something more directly comparable, Tesla’s P/S multiple is 12.8x, even higher than Ferrari's. 

So, while a lot can go wrong, a risk-tolerant investor is not too late to the party. The beautiful part about XPEV stock is that it is options-friendly, with an average 30-day volume of 51,970.

Here’s one to consider. 

The ask price of $6.95 is 28.6% of Xpeng’s closing price from yesterday of $24.29. While that’s a decent loss if the bet doesn’t go your way--48.91% ITM probability--it only has to appreciate 30.09% for you to be in the money. Considering it’s gained 41% in the past month, it certainly could do so over 10 months. 

But again, it’s all relative to your tolerance for risk.